Landsec has completed the sale of its entire hotel portfolio to real estate funds managed by Ares Management alongside operating partner EQ Group for a cash consideration of £400 million. The deal was previously reported to be on the cards last month.
The disposal is in line with Landsec’s strategy to release capital from sectors in which the company does not have scale and to focus its resources on areas where it has genuine competitive advantage.
The hotel portfolio, which comprises 21 assets, is fully let to AccorInvest and generated net income of £28.4 million over the company’s last reported financial year. The income is 100 per cent turnover-linked with a lease contract expiring in 2091 and 12-yearly tenant-only break options, limiting Landsec’s ability to influence performance or add further value to the assets.
Of the total consideration, £350m has been received on completion with the remaining £50 milllion payable within 24 months. Landsec will receive 6 per cent interest p.a. on this outstanding balance, which is ahead of the company’s marginal cost of borrowing. The net proceeds of the sale will initially be used to repay debt.
What they said
Mark Allan, CEO of Landsec, said: “We said in late 2020 that our focus would be on areas where we have a genuine competitive advantage. In line with that strategy, we have continued to recycle capital out of assets where our ability to add further value is limited. The sale of our hotel portfolio and other non-core assets will further strengthen our balance sheet and leave us well placed to take advantage of opportunities in the market as they arise.”